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Parents must give serious thought to protecting their family through estate tax planning. While life insurance and trusts should be a part of every plan, Roth IRAs can be a simple tool for passing money to your child on a tax-free basis.

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Education Savings Accounts A third type of tax break for educational expenses (including elementary and secondary education expenses) is the Coverdell education savings account (ESA), formerly known as an education IRA. "IRA" was something of a misnomer because this type of account is not designed to survive into the beneficiary's retirement. However, the account works similarly to a Roth IRA in that contributions are not deductible, free, and amounts withdrawn from the account under proper circumstances will not be taxed.

Internet Business Opportunity First, we need a quick summary of the Roth IRA. A Roth IRA is an after-tax retirement vehicle that produces huge tax savings because all tax distributions are tax-free. That statement can a bit confusing, so lets break it down. The downside of a Roth IRA is the fact that contributions are not tax deductible as with traditional IRAs or 401(k)s. The upside of a Roth IRA, however, is that all distributions are tax-free once the person reaches the age of 59½. So how can you use a Roth IRA to pass money to your child?

There are numerous opportunities to save money on your personal taxes and personal property taxes. Buying or refinancing a home, contributing to a regular or Roth IRA, investing in higher education, personal property tax, or riding the Wall Street rollercoaster all present you with potential tax exemption breaks. If you become familiar with the rules and keep up with the annual tax and personal property taxes changes, you will be able to take advantage of all the tax exemptions and breaks available to you

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Here' Comparing Retirement Plan Options Topic Roth 401(k) Roth IRA Traditional 401(k) tax dollars Income Limits none $160k married; $110k single none Max. Contribution $15k; $20k for those over age 50 $4k or $5k over 50 same as Roth 401(k) Tax on distributions none if held 5 years and qualified same as Roth 401(k) federal and state taxed

Work At Home Business One of the biggest keys to retirement planning is "time". The more years you spend saving money for retirement, the more you should have when that blessed day arrives. Imagine if you had started saving for retirement when you were 16. How much bigger would your retirement nest egg be? What if you purchased Microsoft stock in 1990 and watched it split eight times? Okay, that was painful example if you missed that opportunity. Nonetheless, why not do for your child what you didn't do for yourself?

Baby boomers in their peak savings years will fuel much of the investment boom. Saving for retirement is being made much easier by the government, favorable pension plans, such as the 401(k) and the Roth IRA. More women in the workforce also means higher incomes and more women qualifying for pensions. meaning that the recipient has the responsibility for investing the money. With such large amounts of money to invest, brokers and financial planners will be in demand to provide investment advice.

Free Online Affiliate Program The fundamental goal of estate planning is to pass as much of your estate as possible to your family on a tax-free basis. You can transfer relatively small amounts of money to your child now. If you have a 16 year-old child with a Roth IRA, you can contribute $4,000 in 2005. That $4,000 is going to grow tax-free for 43 years and be worth quite a bit. A ten percent return would result in the account growing to roughly $200,000 and the full amount would be distributed tax-free. There are other practical advantages to opening a Roth IRA for your child.

There are no income limitations with a Roth 401(k) and they permit higher contributions, unlike Roth IRAs.And the same 5 year holding rule applies to them as to Roth IRAs. Roth 401(k) "qualified" distribution events include death, 2 and disability. A Roth 401(k) election cannot be rescinded. . .you elect it, you're stuck with it. But it can be rolled over into a Roth IRA ( year rule will apply all over again.) no. You can't roll a Roth IRA into a Roth 401(k). And Roth 401(k)s are not compatible with SEPs or Simple plans. The IRS offers this excellent resource on rollovers, if you crave the gory details.

Auction Coin Money Paper As a parent, it is vital that you teach your child the value of money. Opening a Roth IRA gives you the opportunity to sit down and teach your child the value of saving and investing, instead of yelling at them to clean their room. While a parental lecture on the need to save money would typically meet with glassy eyes and yawns, your child's attitude will undoubtedly change when you are talking about their money.

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Best Free Online Affiliate Before you rush out to open a Roth IRA for your child, you must determine if your child is eligible to open an account. To open an account, your son or daughter must be working at least part time for an employer that reports their wages to the IRS. Hiring your child to take out the trash each week is not going to cut it, nor will this strategy work for your 5 year-old. Many teenagers, however, have summer jobs that should suffice for IRS consideration. To avoid any trouble, you should consult with your tax advisor.

Blogging Money Thebillivard A more sublime issue concerns the maturity level of your child. Keep in mind that the Roth IRA will be opened in their name. Your son or daughter will have the legal right to do what they will with the account. It is strongly suggested that you clearly explain the consequences of taking money out of the account [taxes, penalties, being cut out of the will, forced to eat healthy food, grounded for life, etc.] but the decision lies with them. As difficult as it is, try to be objective in evaluating how you child will react to knowing the money is sitting in an account. If you have doubts, you should probably investigate other tax saving strategies.

Best Home Based Business Opening a Roth IRA for your child can be a very effective means of transferring wealth to your child and teaching important life lessons. If your child exercises restraint, your relatively small contribution to their Roth IRA can grow into a sizeable tax-free nest egg.

Affiliate Marketing Program Richard Chapo is CEO of Business Tax Recovery - Obtaining tax refunds for small businesses for overpaid taxes. Discovery tax strategies and deductions in our tax articles section.

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Online Business Opportunity Rick Chapo is with Nomad Journals - makers of writing journals. He is also with BusinessTaxRecovery.com - information on taxes.

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